The Grand Acquisitor

When it was raining porridge, Lucy Rockefeller said, John D.’s dish was always right side up

As the biggest refiner, Rockefeller naturally had the greatest stake in establishing some kind of stability in the industry. Hence he set about to devise a scheme—the so-called South Improvement Company—which would break the feast-and-famine pattern that threatened to overwhelm the industry. In its essence the South Improvement Company was a kind of cartel aimed at holding up oil prices—by arranging “reasonable” freight rates for its own members while levying far higher ones on “outsiders.” Since the scheme was open to all, presumably there would soon be no outsiders, and once all were within the fold, the refiners could operate as a single, powerful economic unit.

The plan might have worked but for the inability of such headstrong and individualistic groups as the railroads and the producers to co-operate for more than a passing moment. When the producers in the Oil Regions rose in wrath against a plan which they (quite rightly) saw as a powerful buying combination against them, the scheme simply collapsed.

The idea of eliminating competition did not, however, collapse with it. Instead, Rockefeller turned to a plan at once much simpler and much more audacious. If he could not eliminate competition, then perhaps he could eliminate his competitors by buying them up one by one—and this he set out to do. The plan was set in motion by a meeting with Colonel Oliver Payne, the chief stockholder in Rockefeller’s biggest competitor. Briefly Rockefeller outlined the ruinous situation which impended if competition were permitted to continue unbridled; equally briefly, he proposed a solution. The Standard would increase its capitalization, the Payne plant would be appraised by impartial judges, and its owners would be given stock in proportion to their equity. As for Payne himself, Rockefeller suggested he should take an active part in the management of the new, bigger Standard Oil.

Payne quickly assented; so did Jabez Bostwick, the biggest refiner in New York, and one after another the remaining refiners sold out. According to Rockefeller, they were only too glad to rid themselves of their burdensome businesses at fair prices; according to many of the refiners, it was a question of taking Rockefeller’s offer or facing sure ruin. We need not debate the point here; what is certain is that by the end of 1872 the Standard was the colossus of Cleveland. There remained only the United States to conquer.

Rockefeller himself was in his mid-thirties. The slightly melancholy visage of the young man had altered; a thick mustache trimmed straight across the bottom hid his lips and gave to his face a commanding, even stern, aspect. In a family portrait we see him standing rather stiffly, carefully dressed as befits a man in his station. For he was already rich—even his non-oil investments, as he wrote to his wife, were enough to give him independence, and his style of life had changed as his fortune had grown. He and his wife now lived in Forest Hill, a large, gaunt house on eighty acres just east of Cleveland. He had begun to indulge himself with snappy trotters, and on a small scale commenced what was to become in time a Brobdingnagian pastime—moving landscape around.

In town, in his business pursuits, he was already the reserved, colorless, almost inscrutable personality who baffled his business contemporaries; at home, he came as close as he could to a goal he sought assiduously—relaxation. His children were his great delight: he taught them to swim and invented strange and wonderful contraptions to keep them afloat; he bicycled with them; he played daring games of blindman’s buff—so daring in fact that he once had to have stitches taken in his head after running full tilt into a doorpost.

It was, in a word, the very model of a Victorian home, affectionate, dutiful, and, of course, rich. An air of rectitude hung over the establishment, not so much as to smother it, but enough to give it a distinctive flavor. Concerts (aside from the performances of their children), literature, art, or theatre were not Rockefeller amusements; in entertaining, their tastes ran to Baptist ministers and business associates. An unpretentious and earnest atmosphere hid—or at least disguised—the wealth; until they were nearly grown up the children had no idea of “who they were.”

And of course the beneficences continued and grew: $23,000 for various charities in 1878, nearly $33,000 in 1880, over $100,000 in 1884. But the nice preciseness of giving was maintained; a pledge card signed in 1883 for the Euclid Avenue Baptist Church reads:

How rich was Rockefeller by 1873, a mere ten years after Andrews, Clark & Company had opened its doors? We cannot make an accurate estimate, but it is certain that he was a millionaire several times over. In another ten years his Standard Oil holdings alone would be worth a phenomenal twenty million dollars—enough, with his other investments, to make him one of the half-dozen richest men in the country.

But now a legal problem began to obtrude. The Standard Oil Company was legally chartered in Ohio, and it had no right to own plants in other states. Not until 1889 would New Jersey amend its incorporation laws to allow a corporation chartered within the state to hold the stock of corporations chartered elsewhere. Hence the question: how was the Standard legally to control its expanding acquisitions in other states?